September 13, 2012

Since 1968, the government has increasingly crusaded for more mortgage lending to minorities and lower income borrowers by attacking lenders that don't lend enough to favored groups. The last push, the White House Conference on Increasing Minority Homeownership on 10/15/2002 where Bush lauded what turned out to be toxic mortgages as engines of racial justice, gave optimistic and/or get-rich-quick lenders an excuse to set off the Housing Bubble of 2004-2007.

You might think that by now everybody would have wised up about how an originally well-intentioned policy had gone too far. But, then, we're not supposed to mention this fact. Moreover, the institutions that brought it about still exist, still get funded, and continue to search out and destroy all evidence of disparate impact in mortgage lending like robot juggernauts from the future in a James Cameron movie.

Here's the latest from the Santa Rosa Press-Democrat: Luther Burbank Savings in Santa Rosa, CA. Luther Burbank is small potatoes, but I guess that just shows how well the government's campaign has succeeded that they are focusing on these guys now.

Luther Burbank Savings will spend $2 million to settle a federal lawsuit accusing the Santa Rosa lender of discriminating against African-American and Latino borrowers with a jumbo loan program that targeted wealthy individuals.

Under the settlement with the U.S. Justice Department, Luther Burbank created a new division to increase conventional lending in minority communities.

The thrift, Sonoma County's largest financial institution with $3.6 billion in assets, did not admit wrongdoing. Luther Burbank is settling the lawsuit to avoid long and costly litigation, said John Biggs, the thrift's president and chief executive. ...

Luther Burbank operates eight branches in California, all in posh areas like Beverly Hills. It specializes in apartment building loans, but ran a small side business that originated a little over 100 single family home mortgages per year. The Feds had no objection to this modest-sized bank's main business's lending practices.

But, apparently they don't have more important targets to focus their anti-discrimination wrath upon:

Instead, prosecutors focused on a smaller line of business that issued jumbo loans through independent brokers to wealthy borrowers. Those loans account for about 15 percent of its portfolio.

The bank chose to offer only “non-traditional” loans — including interest-only and stated-income loans — to high-income borrowers for amounts greater than $400,000. Such loans, when offered by other institutions to first-time home buyers, have been faulted for helping lead to the subprime loan crisis. Historic numbers of borrowers were unable to make their loan payments or keep their homes, resulting in huge financial losses at banks and a sharp downturn in the housing market.

The Justice Department lawsuit alleged that because Luther Burbank would lend no less than $400,000, very few African-American and Latino borrowers were able to qualify for its loans.

In the greater Los Angeles area, for example, only 5.8 percent of Luther Burbank's single-family residential mortgages from 2006 through 2010 were issued to African-American and Latino borrowers, compared to 31.8 percent by comparable prime lenders, the Justice Department said.

"Interest-only and stated-income loans" are what are often called "toxic" mortgages. So, the Obama Administration sued Luther Burbank Savings for not saddling minorities with enough toxic mortgages in 2006.

“It is critical that lenders have policies in place to ensure that they don't discriminate in their lending programs,” Thomas E. Perez, assistant attorney general for the Civil Rights Division, said in a statement.

You know, Thomas E. Perez's statements just haven't been the same since his old spokesmodel Xochitl Hinojosa went to work for a Senate race.

The settlement, filed Wednesday in U.S. District Court in Los Angeles, is the latest to emerge from an Obama administration task force searching for fair-lending violations during the housing boom. It has reached settlements in 18 cases for $370 million, including agreements in July with Wells Fargo and in December with Bank of America.

“The Department of Justice will not allow financial institutions to have in place residential lending practices that illegally impact minority communities,” André Birotte Jr., the U.S. Attorney in Los Angeles, said in a statement.

Luther Burbank's attorney, Andrew L. Sandler, said the case represented the Justice Department's “most aggressive use of the disparate impact discrimination theory.” He was referring to the use of a statistical analysis to allege discrimination.

“It has accused a bank of discrimination because it offered only non-traditional portfolio loan products to high net-worth individuals, and is imposing as part of the settlement a requirement that it offer additional loan products in order to obtain more loans from minority borrowers,” Sandler said in a statement. ...

The thrift lowered its minimum loan limit to $20,000 in June 2011.

In California, $20,000 will get you a refrigerator carton on the edge of the Salton Sea, if you don't mind the smell.

Luther Burbank will now spend $2 million on initiatives to increase lending in minority neighborhoods in California.

Under the settlement, which is subject to court approval, the thrift will invest $1.1 million in a financing program to increase the amount of credit it extends to residential borrowers seeking loans of $400,000 or less.

It also will spend: $450,000 in partnerships with community-based organizations; $300,000 for outreach to potential customers; and $150,000 on consumer education programs.

Which will in turn keep employed a few "community organizers" to keep the juggernaut sniffing for more sources of funds.

36 comments:

Anonymous
said...

You lose credibility with informed people when you push the "diversity shakedowns caused the housing bubble" arguments.

In short:

The US subprime bubble was fed by PRIVATE INVESTOR demand for subprime mortgages. Random DOJ lawsuits like this have always existed, and do not change the fact that during the US real estate bubble the involvment of the US Government and Fannie/Freddie/FHA in the US housing market steadily declined, and was at multi-decade lows during the 2005-2007 peak.

The biggest culprits/suckers were often large German and Chinese banks, both nations whose trade surpluses led them to have large quantities of US dollars to invest and were too greedy to accept the low rates offered by safe dollar investments like treasuries or AAA non-financial corporate bonds.

The proof of this is at the same time the US subprime bubble happened, there was a private equity bubble, a subprime corporate bond bubble, a commerical real estate bubble, and bubble in high-end residential real estate where most purchases are with cash or private unregulated jumbo mortgages. Also, the real estate bubbles in Spain, Ireland, and Iceland, were much larger than the US coastal real estate bubble.

"Since 1968, the government has crusaded for more mortgage lending to minorities and lower income borrowers by attacking lenders that don't lend enough to favored groups. This gave optimistic and/or get-rich-quick lenders an excuse to set off the Housing Bubble of 2004-2007."

Right - so it took more than 35 years to produce a housing bubble? I think you need a few more details in that narrative.

The 14th Amendment and anti-discrimination laws are little more than a giant excuse to get the government's maws deeper and deeper into regulating the private sector and individual peoples' lives. I read (somewhere) that the 14th Amendment is the law cited most often in lawsuits.

"Right - so it took more than 35 years to produce a housing bubble?"

Implementation and enforcement of a law quite often lag its passage: it was a hundred years before the government used the 14th Amendment to overturn Jim Crow; it was over a decade after Brown v. Board before government and the courts really started desegragating (and forcibly integrating) public schools; Title IX was still killing off mens' athletic programs 2 decades after passage; and we are, magically, just now discovering that the congressmen and state legislators who ratified the 14th Amendment intended to give gays the rght to marry.

Bank anti-discrimination laws weren't the sole factor in the US housing bubble, but they played a key role.

The proof of this is at the same time the US subprime bubble happened, there was a private equity bubble, a subprime corporate bond bubble, a commerical real estate bubble, and bubble in high-end residential real estate where most purchases are with cash or private unregulated jumbo mortgages.

Not to mention a bubble in subprime sovereign debt that's causing so much trouble in Europe right now.

You people are missing the point here. Let's set aside Steve's theory of the Diversity Mortgage Meltdown. That's not the main point here.

The main point here is: According to the U.S. government, a bank's loan program that sets a certain minimum loan value, in this case $400,000, amounts to "DISCRIMINATION" in the event that not enough Non-Asian Minorities can afford it. Seriously!! "DISCRIMINATION" = setting a high minimum loan value.

This is the world we live in.

To take a page from Steve, I look forward to investigations of "DISCRIMINATION" in the area of such SWPL- and Scots-Irish favored luxury goods as the pricing of MacBook Air computers, the allocation of slots in the Westchester and Palo Alto public school systems, the pricing of Toyota Prius automobiles, etc.

In fact, the housing crisis was conceived when Clinton initiated a multi-trillion dollar social entitlement program with the objective of buying houses for millions of Americans who could not afford to buy houses. Further, rather than financing this expenditure directly, the Clinton administration encouraged (indeed forced) the banking system to finance the program with what later became known as “toxic subprime mortgages.” It is important to realize that mortgage brokers, commercial banks, Fannie Mae and Wall Street were all doing the administration's bidding when they created the subprime market and the explosion of financial products that were based on subprime mortgages. In fact, none of this could have happened without government collaboration to pass enabling financial system regulations, and to aid in getting the mortgages off of commercial bank balance sheets.

I do not think that Clinton knew quite how far this thing would snowball. But there is no doubt that his administration started the ball rolling and continued giving it hefty shoves down the hill while it gathered size and momentum to the point at which it became impossible to stop. It is also important to note here that Greenspan tried to convince people to stop it in 2005, aided by the Republicans who proposed legislation to that effect. However, the legislation was defeated by the Democrats in the Senate.

The conclusion is that culpability for creating the housing crisis lies entirely with the Democrats. And, while it may be true Obama that is not solely responsible for the mess, he most definitely shares in the blame. Obama was heavily involved in pursuing this atrocity along with his community organizing friends at ACORN. Obama in particular was suing banks for basing their lending policies on the financial condition of the borrower instead of his skin color. Once a race-huckster, always a race-huckster. Moreover, as this article demonstrates, Obama is up to his old tricks trying to force more banks into bankruptcy.

This is the largest financial con in history. It has harmed more Americans than any policy enacted by the US government since FDR created the Great Depression. And the people responsible reside entirely within the Democratic party and the radical elements of the American left. It is a story that ought to be told.

“The Department of Justice will not allow financial institutions to have in place residential lending practices that illegally impact minority communities,” André Birotte Jr., the U.S. Attorney in Los Angeles, said in a statement.A US Attorney named André, he must be French.http://en.wikipedia.org/wiki/Andr%C3%A9_Birotte_Jr.

The subtext here is that the DOJ criminal division ((who would ordinarily prosecute bank fraud) hasn't done a damn thing to go after bank fraud, too busy fighting the existential threat of steroids in baseball, I guess.

Remember, Bush I's DOJ convicted a thousand bankers of fraud after the S&L scandal; Obama's DOJ... approximately a thousand fewer. For good or ill, the only part of Eric Holder's DOJ that is willing to go after banks is the Civil Rights Division. Of course, since that's probably the least damaging way for the civil rights division to spend its time, they should keep on keeping on.

Incidentally, the 14th Amendment (guaranteeing equal protection under the law) applies only to govt institutions, its the 13th Amendment (abolishing slavery and the badges of slavery--- i.e. racial discrimination) that is enforceable against private parties-- the only part of the Constitution that is actually.

The bank chose to offer only “non-traditional” loans — including interest-only and stated-income loans — to high-income borrowers for amounts greater than $400,000.

Get your story straight. Either they're loans to high-income borrowers, or they're loans to people who say they have high incomes, but you're a typical MSM moron who doesn't even understand what he writes.

The bank chose to offer only “non-traditional” loans — including interest-only and stated-income loans — to high-income borrowers for amounts greater than $400,000.

Get your story straight. Either they're loans to high-income borrowers, or they're loans to people who say they have high incomes, but you're a typical MSM moron who doesn't even understand what he writes.

If they stayed above water doing it, sounds like an affinity network. If George Clooney or Harvey Weinstein walks into my brokerage and requests a mortgage because he just spotted a property, I'm giving it to him and we'll waive the paperwork.

Singapore solved the problem of multiculturalism by putting Chineses, Malays and Indians all in the same building.

I think the title of the post alludes to this, from http://en.wikipedia.org/wiki/Battle_of_Singapore:

It is a commonly repeated misconception that Singapore's famous large-calibre coastal guns were ineffective against the Japanese because they were designed to face south to defend the harbour against naval attack and could not be turned around to face north. In fact, most of the guns could be turned around, and were indeed fired at the invaders. However, the guns - which included one battery of three 15 in (380 mm) guns and one with two 15 in (380 mm) guns — were supplied mostly with armour-piercing (AP) shells and few high explosive (HE) shells. AP shells were designed to penetrate the hulls of heavily armoured warships and were ineffective against personnel. Military analysts later estimated that if the guns had been well supplied with HE shells the Japanese attackers would have suffered heavy casualties, but the invasion would not have been prevented by this means alone.

Isn't this just the craziest set of rules a supposedly 'capitalist' and 'free market' society has ever devised?Businesses are in business to make money. No ifs not buts, that's the name of the game, the whole raison d'etre. Now, assuredly the best, and safest way to make money is to cater to those who already have money. Some might think that 'unjust' or 'unfair' but that's just the way it is, money is how money does. The lunatic hybris of communism-cum-capitalism that the feds are trying to push helps no one and ruins everyone. If you want socialism, do it properly and fund the poor, directly from central funds, rather trying to subcontract the job out to people who have no interest or responsibility.

Tom is a busy boy, too. Today he's in Portland sticking it to the Police for tasing too many crazy people.Last month he was in Seattle, installing a consent decree on a shamefully supine Seattle after a cop shot and killed an Indian drunkard. The DOJ didn't even pretend to find a pattern of bias in their ensuing investigation--pretty remarkable really--yet they nonetheless are putting down the hammer of "reform". Seattle media joined mayor's office and PD in rolling over and presenting their rears like purple-assed baboons.Portland too, I'm sure. The liberal provincials are simply incapable of offering resistance, over-awed by federal might, thoroughly on board ideologically; hell, I think they're secretly flattered at the attention.

"This is the largest financial con in history. It has harmed more Americans than any policy enacted by the US government since FDR created the Great Depression. And the people responsible reside entirely within the Democratic party and the radical elements of the American left. It is a story that ought to be told."

I think it is told in Reckless Endangerment". I'm about two thirds through it. the Republicans are fairly prominently shown to be trying to stop it, without the fact that it's mostly Republicans being explicitly pointed out.

I haven't noticed Greenspan trying to stop it, but I might've missed it. At many points he's shown to have been helping it along.

It doesn't want to draw clearly the overall devastating conclusions, but the story is pretty easy to extract from the facts presented.Robert Hume

The Justice Department lawsuit alleged that because Luther Burbank would lend no less than $400,000, very few African-American and Latino borrowers were able to qualify for its loans.

Maybe so, but that's not the bank's fault.

Was their ever any evidence presented -- or requested, e.g. by defense counsel for the bank (assuming they put up some kind of defense) -- that there was a pattern of denying these $400k+ loans to non-whites who were qualified for them and applied?

Steve, you didn't mention the funniest part of all this: "It has reached settlements in 18 cases for $370 million, including agreements in July with Wells Fargo and in December with Bank of America."

$370 million?!? Big money to you or me, but to banks this is a few bowls of free cookies. The US debt clock goes up $3 million EVERY MINUTE. And while these banks are getting dinged a few million here and there, the Fed announces QE3. Hahaha, this country is such a scam!

"The biggest culprits/suckers were often large German and Chinese banks...."

Bullshit. Nobody demands to lose money.

The didn't demand to lose money. They demanded that the governments (plural) of the US and Europe stick the taxpayers with their (the banks) losses. They demanded that other people lose money to cover their own reckless bets. And such is their political power that their every wish was granted.

If you made all the loans the government forces you to make and held on to the paper you'd go broke the next time the RE market turned down.

Government does not and cannot force banks to do anything which banks don't already want to so. Some of you people have mistaken Atlas Shrugged for reality. All the real political power in America, and in the Western world in general, rests in the hands of a small number of very wealthy individuals.

These people made a lot more money from the bubble on its way up, and when it popped, they stuck taxpayers in Europe and the US with the tab. You almost have to admire their cynical ruthlessness.

Think the Republicans could have ran with this more against minority housing but the Bushes love Mexicans having houses. We could to win Florida and Texas. Texas was spared because of laws that predate the Republican takeover of Texas government that limit you on lending money that you can't afford. If these laws were not of the books Rick Perry would have allow Texas to have been another Arizona. Democratics wanted to loosen the rules for minorities particularly blacks and Hispanics in the Southwest. Republicans wanted to loosen them so the Housewives of Orange County could buy houses they couldn't afford-Ladera Ranch fits this since it was high on bad loans and was mainly white. The only politicians good on this were probably Ron Paul and Gary Johnson.

Well, the only real Blue state effective heavily by the housing bubble was California, granted federal input is important but so is state impute, the Democratics in California wanted it going so Hispanics could get construction jobs when the garment work was being shipped overseas and also buy houses. Republicans politicians in places like Orange County and San Diego also gave in since Realtors could sell million dollar homes people couldn't afford in places like Coto or Santa Fe Springs.

2025 white Evangelicals moved from Texas to LA,Ok and Miss, what happen the dammed state looks too much like New Mexico. We try to kept the state red but now that all the hispanic youth can vote we where deep red in 2012 now a nice purple, we should have kicked Rick Perry ass to the moon.

You're right. I don't know how I could have failed to be convinced by your fact-filled presentation.

Come back when you figure out how to stop posting as "Anonymous". You idiot.

Let me help you a bit first: What happened with the whole "sub-prime" thing was certainly more complicated than just NAMs not paying on their mortgages in disproportionate numbers. Many players did bad things all along the chain of mortgage origination and consumption.

Remarkable movie. Blows away the rather stupid OFFICE SPACE. In some ways, Jill Sprecher is more interesting than Whit Stillman. CLOCKWATCHERS is like a cross between BARTLEBY and GLENGARRY GLEN ROSS. Has to be seen more than once to catch all the nuances.

"the institutions that brought it about still exist, still get funded"

Precisely.Once somebody is being paid by the taxpayer for something there will always be pressure for it to continue (or it it is particularly useless and the payees thus have nothing to do they will have more free time to lobby for more).

Thus though it is now impossible to claim that catastrophic global warming is happening, the subsidy dependent windmill industry is well entrenched and able to demand more.

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